Bank of Canada Warns Tariff Dispute Could Chill Economic Growth

The Bank of Canada's governing council is worried that a re-escalating trade dispute with the US could put a chill on household spending, business investment, and hiring. The concern is despite the economy showing signs of strength before the latest tariff wave, which hit Canadian goods worth $28 billion. Monetary policymakers observed that while targeted sectors would be hard hit, the overall impact on the economy would likely be modest.

The council felt that Canada's counter-tariffs, targeting intermediate inputs like steel and goods with Canadian substitutes, would have a muted impact on inflation. They noted that high energy prices tied to the war in Iran are still a concern, but see little evidence yet of cost pressures spreading beyond gas pumps.